© 2008 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice August 2008 Open Innovation: An HP Case Study Mauricio Leon Hewlett Packard Consumer Desktops BU Taiwan

Agenda Consumer Desktop PCs at HP Open/Closed Innovation Open Innovation at the Consumer Desktop GBU Challenges

HP’s Consumer Desktop PC GBU Responsible for managing the consumer desktop category worldwide Classical business unit organization Headquarters in Cupertino, California

Consumer Desktops -- Business Environment Very competitive Flat to declining market New product categories Geographical segmentation Need to do more with less

Closed Innovation Ideas are internally generated Results of innovation carried through to the markets as a product or service by the same company Commercialized innovations generated this way drove profits and enabled further investment in R&D Innovation model followed by most companies in first half of 20 th century

Open Innovation Internal and external ideas as inputs to the innovation process, combined with internal and external paths to markets Under Open Innovation, ideas come to the innovation process via −Internal research, external research −Licensing other companies’ technologies −Acquisition of other companies products Conditions that supported the transition from Closed to Open −Increased availability of quality technical talent globally −Increased mobility of talent across geographies and firms −The increasing number of firms developing new products and services Adoption is driven by R&D management or business strategy

Open Innovation at HP’s Consumer Desktop GBU Open Innovation has been a key part of the Consumer Desktop GBU’s business strategy Our use of Open Innovation has evolved with time Focus has evolved from R&D to global R&D management −Taipei operations −Develop new skills

Business Drivers of Open Innovation Very competitive market Low profit margins, low R&D budgets Complex product portfolio Open Innovation delivers for Consumer Desktops −New ideas, new products −Lower R&D investments, manageable risks −Broader product portfolio

Enablers of Open Innovation Standards, open architectures, platforms −Design modularization Ecosystem around platforms −Standards −Products −Companies Information and communication technologies

Challenges Determine how to evolve the Open Innovation model as the PC market matures Identify the need for developing owned IP Develop the skills to execute “Closed Innovation” where needed

Questions